Since 1987, Brinker Capital has provided investment solutions based on ideas generated from listening to the needs of advisors. From being a pioneer of multi-asset class investments to using behavioral finance to manage the emotions of investing, our disciplined investment approach is the key to helping investors achieve better outcomes.

Tag Archives: Bogle

Having checked in this week with many of our advisors and the clients they serve, we know that this has been a stressful week for everyone involved in the market. On Monday, we wanted to provide a few proactive starting points and created a list of “do’s” for volatile markets. However, at times like this, knowing what not to do can be just as important as knowing what to do. With that, we present a list of things you should absolutely not be doing in periods of market volatility.

Don’t lose your sense of history – The average intrayear drawdown over the past 35 years has been just over 14%. The market ended the year higher on 27 of those 35 years. A relatively placid six years has lulled investors into a false reality, but nothing that we have experienced this year is out of the average by historical measures.

Don’t equate risk with volatility – Repeat after me, “volatility does not equal risk.” Risk is the likelihood that you will not have the money you need at the time you need it to live the life you want to live. Nothing more, nothing less. Paper losses are not “risk” and neither are the gyrations of a volatile market.

Don’t focus on the minute to minute – Despite the enormous wealth creating power of the market, looking at it too closely can be terrifying. A daily look at portfolio values means you see a loss 46.7% of the time, whereas a yearly look shows a loss a mere 27.6% of the time. Limited looking leads to increased feelings of security and improved decision-making.

Don’t forget how markets work – Do you know why stocks outperform other asset classes by about 5% on a volatility-adjusted basis? Because they can be scary at times, that’s why! Long term investors have been handsomely rewarded by equity markets, but those rewards come at the price of bravery during periods short-term uncertainty.

Don’t give in to action bias – At most times and in most situations, increased effort leads to improved outcomes. Want to lose weight? Start running! Want to learn a new skill set? Go back to school. Investing is that rare world where doing less actually gets you more. James O’Shaughnessy of “What Works on Wall Street” fame relates an illustrative story of a study done at Fidelity. When they surveyed their accounts to see which had done best, they uncovered something counterintuitive. The best-performing accounts were those that had been forgotten entirely. In the immortal words of Jack Bogle, “don’t do something, just stand there!”

Views expressed are for illustrative purposes only. The information was created and supplied by Dr. Daniel Crosby of Nocturne Capital, an unaffiliated third party. Brinker Capital Inc., a Registered Investment Advisor

In an article earlier this week, Mr. John Bogle, founder of the Vanguard Group, decreed that America’s current retirement system is broken. As far as a fix, he offers only two suggestions. The first is to increase the current level of taxable income subject to Social Security taxes to $140,000-$150,000. The second is a reduction in the automatic cost of living adjustments that are used to calculate benefits.

While both would generate significant increases and savings to Social Security, they do not address the larger issues with our retirement system. As Bogle notes, the three pillars of retirement are Social Security, Defined Benefit plans and Defined Contribution plans—and they are in bad shape. In order for defined contributions plans to work better, we need to continue to automate as much of the functionality as possible, incentivize larger contributions, and make sure that an appropriate investment option is selected based on the participants age and realistic expectations about goals and markets.

Here is some food for thought. What if you could earn an additional tax credit by deferring at least 10% of salary or not having a loan against your 401(k)? What if an employer gave one additional vacation day per year if a company-wide goal of participation and contribution was reached? Ultimately, the system can work, but we need to continue to innovate and provide fresh ideas.

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Brinker Capital provides this communication as a matter of general information. Portfolio managers at Brinker Capital make investment decisions in accordance with specific client guidelines and restrictions. As a result, client accounts may differ in strategy and composition from the information presented herein. Any facts and statistics quoted are from sources believed to be reliable, but they may be incomplete or condensed and we do not guarantee their accuracy. This communication is not an offer or solicitation to purchase or sell any security, and it is not a research report. Individuals should consult with a qualified financial professional before making any investment decisions.